LOOKING FORWARD IN U.S.-CHINA RELATIONS: OPPORTUNITIES AND RISKS

As we approach the mid-year point, the U.S.-China relationship faces critical opportunities that could either enhance or impede their cooperation in the years ahead. On both economic and political fronts, the year 2015 is a decisive one for the Obama and Xi administrations, particularly as a number of policy deadlines draw near. In what has become a buzzword for U.S. foreign policy in China, the “pivot to Asia” requires the U.S. to react to China’s fast-changing domestic dynamics and a number of new policy strategies released by the CPPCC (Chinese People’s Political Consultative Conference) and NPC (National People’s Congress), China’s ruling bodies, in March’s Parliamentary Sessions (Lianghui). Leading up to key moments for U.S.-China cooperation, notably June’s Strategic and Economic Dialogue (S&ED) and President Xi Jinping’s first state visit to the US in September, Washington should address China’s domestic and regional concerns; pinpoint shared international security interests; and promote economic initiatives that benefit bilateral trade. At the same time, the U.S. needs to take a strong position on actions in China that undermine U.S. national security and democratic principles.

Opportunities:

1. A “new normal” for China’s economy
The phrase “new normal” was coined by Premier Li Keqiang in the March Parliamentary Sessions, where he set China’s growth target in 2015 at 7 percent, as opposed to last year’s 7.5 percent. This is the slowest growth rate China has experienced in a quarter-century. A slowdown in economic growth means an expansion in service industries and domestic consumption, resulting in benefits like an increased number of jobs and higher wages, particularly in China’s robust cities. However, it also forces China to concentrate its efforts in cultivating labor-intensive growth industries, of which it has less experience. The US could help by encouraging market reforms that are already underway, which could lift current restrictions to market access for US goods. A healthy Chinese economy is good for the U.S.

2. Shared international security interests
In light of high-profile ISIS threats in the past year, Beijing and Washington have expressed a commitment to act collaboratively in counterterrorism efforts as well as peacemaking efforts in the Middle East. As the U.S. slowly withdraws from Afghanistan, China has heightened its efforts in Afghanistan diplomacy, with plans to play a prominent role in the reconciliation process between the Afghan government and the Taliban. China is a leading member of the Shanghai Cooperation Organization that facilitates cooperation between China, Russia, and their Central Asian partners, many of whom are Afghanistan’s neighbors. The U.S. would benefit through strategic dialogue with China on foreign policy in the Middle East.

China also has the financial bandwidth to pursue development projects in the region. In Pakistan, economic projects for a “China-Pakistan Economic Corridor” are part of a broader effort for Chinese engagement in the country. In Egypt, the U.S. and China share a stake in its economic growth, which could foster joint efforts to explore investment opportunities in Egypt. This would give the U.S. and China a ripe opportunity for collaboration.

3. Trade and investment
A US-China Bilateral Investment Treaty (BIT), a policy initiative that encourages increased cross-border investment, has been in the works for a while now. The treaty would incentivize Chinese foreign direct investment in the U.S. and vice versa. It would also give the U.S. and China a rules-based apparatus for their transactions. A BIT can serve two important purposes. One, it would encourage China to move forward with open market reforms. Improved market access could deter China’s anti-competition policies that have blocked U.S. businesses from entering the Chinese market. Second, it is crucial for the U.S. to open its own doors to Chinese investment. One of the areas that would greatly benefit from Chinese investment is the renewable energy sector. China is the world’s largest investor in renewable energy technology; a recent report suggests that China could get 85 percent of its electricity from renewable resources by 2050. Industry sensitivities have prevented large-scale Chinese energy investments in the U.S. in the past. The U.S. should put its resources behind the BIT and encourage U.S.-China cooperation in the development of renewables.

Risks:

1. China’s improved relations with Russia
One of the impediments to U.S.-China cooperation is China’s partnerships with countries that have poor relations with the U.S. The most notable of them is Russia. Xi is currently in Russia to attend a commemorative parade for the 70th anniversary of the end of WWII in Europe (an event that originally was also to be attended by North Korea’s leader Kim Jong Un). Since Putin’s presidential term in 2012, Russia and China have elevated their relationship, especially in energy cooperation and infrastructure projects. Aside from the high-profile $400 billion Gazprom contract signed last May, China and Russia are also cooperating on the construction of a high-speed rail in Russia. Amid increasing acrimony between Russia and the West after the U.S. renewed sanctions on Russia over Ukraine, China has not only increased its cooperation with Russia but also condemned the U.S.’s use of sanctions. China’s support of Russia’s geopolitical aggressions is indicative of its own problematic regional ambitions.

2. Growing military strength and maritime aggression
China continues to be the main aggressor in territorial conflicts in the South China Sea. In spite of U.S. warnings to China to de-escalate its military presence in the area, China still invokes the “nine-dashed line,” a historic marker of China’s territory, to justify its legal claims to the sea. The U.S. has an interest in maintaining free trade and secure sea lines in the area, both for its own economic activities and its commitment to support democratic trade principles on behalf of its South China Sea allies. China has also recently chosen not to join international arbitration efforts initiated by the Philippines and Vietnam. China’s emboldened claims are increasingly problematic as the U.S. has little power to hold it responsible in adhering to international laws.

3. China’s anti-democratic values
The world today has experienced an interesting trend of democratic recession, and the Asia Pacific is no exception. Alongside countries in Southeast Asia that have either undergone incomplete democratic transitions or collapse (i.e. Thailand), China is still the greatest presence in the Asia Pacific region that promotes values that undermine democracy. In one of the most recent cases of social suppression in civil-society China, the Chinese government arrested five young feminists on the eve of International Women’s Day for promoting disorder. This is just one glaring example of China’s divergent position on human rights, freedom of expression, and free trade – all fundamental democratic values. Along with an escalation of internet censorship and mandates for American tech firms to release sensitive information to Chinese authorities, China’s policies reflect a continued support for the centralized government power. The anniversary of Tiananmen Square on June 4, which will see heightened Chinese security forces, and CPC Founding Day on July 1 are likely to affirm the fundamental differences that impede U.S.-China relations.